What Is IRMAA? Understanding Medicare's Income-Related Surcharges

Many Medicare beneficiaries are surprised when they receive a letter from the Social Security Administration informing them that they'll pay more for their Medicare coverage than expected. This additional cost is known as IRMAA, which stands for Income-Related Monthly Adjustment Amount.

If you've recently retired, sold a business, taken a large retirement account distribution, or experienced another significant financial event, understanding IRMAA can help you avoid surprises and potentially reduce your Medicare costs.

What Is IRMAA?

IRMAA is an additional surcharge added to certain Medicare premiums for beneficiaries with higher incomes.

While most people pay the standard premium for Medicare Part B, individuals with income above specific thresholds may pay more. IRMAA can also increase the cost of Medicare Part D prescription drug coverage.

The Social Security Administration determines whether you owe IRMAA based on information received from the IRS.

In simple terms, the more income you report, the more you may pay for Medicare.

Which Parts of Medicare Are Affected by IRMAA?

IRMAA only applies to:

• Medicare Part B (Medical Insurance)

• Medicare Part D (Prescription Drug Coverage)

IRMAA does not affect:

• Medicare Part A (Hospital Insurance)

• Medicare Part C (Medicare Advantage) premiums directly

However, if you are enrolled in a Medicare Advantage plan that includes prescription drug coverage, you may still pay a Part D IRMAA surcharge in addition to your plan premium.

How Does Medicare Determine My Income?

Medicare uses a "look-back" period when determining IRMAA.

For example, your 2026 Medicare premiums are generally based on your tax return from two years earlier.

The Social Security Administration typically reviews your:

• Adjusted Gross Income (AGI)

• Tax-exempt interest income

These figures are combined to calculate your Modified Adjusted Gross Income (MAGI). This means your current income may differ significantly from the income Medicare uses to determine your premiums.

Common Situations That Can Trigger IRMAA

Many beneficiaries encounter IRMAA after a one-time financial event rather than because of their ongoing retirement income.

Some common examples include:

• Selling a business

• Selling investment property

• Taking a large IRA withdrawal

• Roth conversion strategies

• Capital gains from investments

• Receiving a large bonus before retirement

• Required Minimum Distributions (RMDs)

We've seen many Idaho retirees receive an unexpected IRMAA notice after completing a Roth conversion or taking a larger-than-normal distribution from their retirement account.

Can IRMAA Be Appealed?

Yes! One of the most misunderstood aspects of IRMAA is that beneficiaries may have the right to request a review if their income has decreased due to certain life-changing events.

Examples may include:

• Retirement

• Work reduction

• Marriage

• Divorce

• Death of a spouse

• Loss of income-producing property

• Loss of pension income

If Medicare is using income from a year that no longer reflects your financial situation, you may be able to request a new determination.

Many retirees who stop working discover they qualify for lower premiums after filing an IRMAA appeal.

How IRMAA Can Affect Retirement Planning

IRMAA is more than just a Medicare issue—it can impact your overall retirement strategy.

Before making major financial decisions, retirees should consider how actions such as:

• Roth conversions

• Large IRA distributions

• Investment sales

• Pension elections

These actions may affect future Medicare premiums. In some cases, a financial decision that appears beneficial today could increase Medicare costs for one or more years. Understanding these potential consequences allows retirees to make more informed decisions about their income and healthcare expenses.

How Medicare and Social Security Work Together

For most beneficiaries, Medicare premiums are deducted directly from their Social Security benefit. When IRMAA applies, the additional surcharge is usually deducted the same way. As a result, many retirees first notice IRMAA when their monthly Social Security deposit is smaller than expected.

This can be especially surprising for individuals who have recently reached Full Retirement Age and are beginning to receive retirement benefits.

How Preferred Senior Benefits Can Help

At Preferred Senior Benefits in Meridian, Idaho, we regularly help Medicare beneficiaries understand how Medicare costs fit into their overall retirement picture.

While we do not provide tax advice, we can help you understand:

• How Medicare premiums are calculated

• Which parts of Medicare are affected by IRMAA

• How Medicare Part B and Medicare Part D costs may change

• The differences between Medicare Supplement and Medicare Advantage plans

• Questions to discuss with your tax professional or financial advisor

Whether you're new to Medicare or simply trying to understand an unexpected premium increase, our team is here to help.

We can meet with you in person, over the phone, or via Zoom to answer your Medicare questions and help you better understand your options.

If you'd like assistance navigating Medicare, call Preferred Senior Benefits today at (208) 818-2523. We look forward to helping you make informed decisions about your healthcare coverage and retirement planning.